Rob Woodward - Transcript
[Interviewer is Tim Mitchell, No Date but probably May-August, 2017]
[Start of Recording]
I: Rob, OK, before you came here as the Chief Executive Officer, what were your views of STV as a company and as a brand?
R: Well, I grew up in Troon so I've got lots of childhood memories of watching, you know, Cartoon Cavalcade and all the other great STV programmes. I have a great fondness of the brand but, from a corporate prospective, SMG just got itself into a very difficult position and, I think, just became a tarnished brand so, clearly, something had to be done.
I: Now, before you arrived and got your feet under the desk and got full sight of the books and knew what you were dealing with, from your position back then what did you sense the issues were at a governance level that were going off the rails?
R: Well, I think the Company's strategy was basically to become a one-stop media platform covering everything from TV to outdoor to radio and to become a must-buy for advertisers. The fact was that the brands that SMG acquired were, when you put them together, they really didn't have very much synergy. So, the Company really continued to operate as a diverse set of media assets with no synergies between them. And, I think, the previous Board, I would say, they kind of overspent, they paid rights to top dollar for those acquisitions and then they also took their eye off the ball in terms of what it took to make each one of those acquired companies successful. And, along the way, they funded it through debts which was very expensive and, say, from an outsider's perspective, a bit of a broken down sheet, too much debt and a strategy that clearly wasn't working.
I: Was there any sense in which you looked at it and thought it was incoherent because Gus Macdonald had bought The Herald and then there was the merger/takeover of Grampian, which might have made sense in terms of trying to keep STV as a separate entity within the ITV Network but then there's this explosion of buying everything at a very high price! Did any of it make sense or was it always a disaster waiting to happen if the banks were going to say at some future date, "We want our money back, you'd better sell off what you've bought and less than you've paid for it!"
R: Well, I think the initial strategy under Gus made absolute sense, which is to focus on Scottish assets so, acquiring Grampian and merging Grampian with STV, kind of serving the whole of Scotland totally made sense and, kind of, nearing what ITV has done across England, Wales and Northern Ireland. I think the issue was, subsequent to that, was acquiring, you know, brands like Virgin, Primesight, that didn't really have much of a presence in Scotland, largely based down south and, to my point, they just didn't really, they didn't sit well with the core, I viewed, with the core of the business here in Scotland.
I: Who approached you to become part of the Management Team and what were you collectively looking to do?
R: I just had a passion that somebody needed to come and do something about this company and I wanted to, I believed that I had a plan to do essentially that. I talked to a number of shareholders and I was ultimately approached by a company called Hanover, who are an activist shareholder, so I worked with Hanover. They acquired some of the STV stock, they approached all the other shareholders and, basically, shareholders were very happy to support our rescue plan for the business. On the 28 February, 2007, the old Board stepped down en masse and a new Board was put in place with me installed as Chief Executive.
I: When you were working with an activist shareholder, what gave you the confidence that the business could have been turned around because, arguably, you could have looked at all of these businesses where there was no synergies and had been bought at very, very high prices and you might have been forgiven for thinking, 'That's just going down the pan! That's not there to be saved!' What persuaded you that it was saveable?
R: Well, at its heart, what I always believed was that Scotland deserves and Scotland can support a front for innovative media business serving Scotland and that was always my thesis and time has actually proved us right! So, what we needed to do was simply the Company and refocus it around the core asset, which was STV and Scotland, so that the heart of the plan was actually simplicity. It was kind of, you know, it was back to the past. It was to refocus the Company around the Crown Jewel assets, which was still profitable, still throwing off a good amount of cash but it had just been under loved.
I: What were the legacy issues? SMG legacy issues that you dealt with because working with an activist shareholder to replace a Board is one thing, coming in and being there seven days a week and being able to ? from the coalface is quite another. Was it in a worse state than you had imagined?
R: You know, this is about the only company that I have ever worked in, or looked at, where literally every stone for you uncovered, kind of had another piece of bad news. There was no good news on my arrival and I was banking on there being at least some hidden gems that the previous Board had, kind of, overlooked. I would say all the good news had been drained out of this company and it was in quite a perilous state. It was in a worse state than the market and people on the outside, including me, actually recognised.
I: Let's go through some of the main ones affecting STV and the main one, debt. How big was it?
R: Debt, when I arrived, was just shy of £190 million. That equated to about eight times net debt, which, by most peoples' standards means that's debt that you just can't service. And I remember it as my second day here and we were summoned to a meeting with the banks, our lenders down in London. I counted the number of people in the room. I think it was thirty-six advisors from the banking syndicate who had one thing on their mind - how was I, as new Chief Executive going to ensure that they got their money back? So, it was, we got there just in time. If we hadn't arrived then (you see it with other companies) the banks would have started to have a more direct running within the Company. We actually managed to avoid that. We came out with a plan pretty much that we put in place at the time of my arrival. The banks were willing to give us some time and then, the deal was was that we would then go through an orderly sale process of the non-core assets, which is what we started immediately.
I: So, that's the issue of debt. I suppose, in a sense, these are related, whether the contractual arrangements that we had which were just really pulling the rug from underneath your feet. I'm thinking of things like Pearl and Dean.
R: Thank you for reminding me! So, Pearl and Dean was a really bad issue so it was, I think the old Board had felt compelled to maintain the size of the Pearl and Dean business through a particular contract with Vue Cinemas. The problem with the contract was it was an onerous contract from day one! It meant that, before we did anything, we were almost guaranteed to lose a million pounds a year on that single contract. And then, to make it worse, we couldn't even just close Pearl and Dean down because the Board, the previous Board, had provided a parent company guarantee so we were stuck with it! So, at the time of my arrival, I knew that we had another, by that time it was just over four years of this contract to run and that was four million pounds of losses to sustain. The outside world didn't know that so that was, yes, so that added to the challenges ahead!
I: So, nearly £190 million worth of corporate debt, onerous contracts which are limiting your financial room for manoeuvre to rebuild - what do you do?
R: So, my plan was to do three things and to do them all simultaneously. Number one was to start to sell off the non-core businesses, which were Primesight, the outdoor advertising business, Virgin Radio and Pearl and Dean. To get those businesses disposed of as quickly as possible. The second thing, which we did in parallel, was then to take quite a lot of cost out of the core of the business at STV and ensure that we'd got a Management structure, an organisation structure and people that were absolutely fit for purpose that got what we wanted to do. And then, the third thing, was to start to sow some seeds of organic growth and start to strengthen and invest in STV so that was the plan. So, the first of the disposal was Primesight, the outdoor business, that we managed to get away reasonably quickly and the market, the recession hadn't started to bite. We then started to try and sell Virgin Radio and we suddenly realised that we were touching the headwinds of a recession so, at that time, we went out to our shareholders, our equity shareholders, and we wanted to - it's called the Rescue Rights - so we went through Rescue Rights, we raised capital for the business and that bought us some time but the good news was that that was a strong endorsement from our shareholders that they were willing to back the new Board and myself and the plan. We did that and then we went through an orderly process of selling Virgin Radio. We sold it to Times of India and the challenge there was that we discovered that Bridget Branson had a right of veto over the continued use of the Virgin name so we were basically selling a branded radio station without the brand but we managed to do it and the station was bought by the Times of India and then it was rebranded as Absolute Radio.
I: Let me get your observation on this because at the time, when the new Board came in, quite a lot of us on the shop floor thought at that point this could go very bad, sort of the Channel Four's background here, the model there is Publisher/Contractor and you're a Publisher/Producer, this could mean the way in which we can do business and do our programmes could be turned upside down, we might all be out in the street in six months time. That's what a lot of us thought! Was moving towards that model ever, did you ever seriously think about that?
R: No, there was never a model for STV because we're an integrated Producer/Broadcaster and that sits very comfortably at the heart of this Company. That's one of the reasons it makes it special and, I think, if you took that programme-making ability out of STV you'd have, you know, you'd have been cutting the heart out of the business. No, it was model that was never, it was never figured. In fact, almost the opposite. My plan was always to produce more content and to increase our relevance, our connection to Scotland through more relevant content. I think previous generations of Management had already, had almost seen the license obligations, the PSD [Payment Services Directive] license obligations as a cost to the business and had tried to cut and cut and cut and do as little as possible. But I tried to turn that on my head and say, "Actually, there's a really great opportunity to be something special by properly serving Scotland, which is why we've always comfortably outperformed any of our PSD license obligations in my tenure.
I: I mean, in the programme terms, let me ask you about what you, just talk a little bit more about what you wanted to do in programme terms. When Gus Macdonald was alive in '86, you could look at his time in the business, there was a right solid legacy of ditching what you might call the tartan and the haggis variety type stuff. More hard-edge News and Current Affairs, thousand hours of local programming from the license obligation in '93, making more of the BBC, getting more viewers in the BBC and then, because of the issues that you've alluded to, those of us working here and are doing a lot, all of sudden see programming almost seems like an afterthought so what was it you really wanted to do in programming terms?
R: We're always going to use News and Current Affairs as a main stay and I think we've been proved right. We were right to make the investments that we did and, particularly that everything Scotland has gone through in the last ten years, through financial necessity we actually started to go through what we called our opt-out strategy and, you know, I will just be 100% frank about it! The reason we were doing that was because financially we needed to. We were in the midst of a recession. We were seeing our advertising income reduced by 10% and we had no control over the main cost of this business, which was our contribution to the ITV Network programme budget. But, we found out that, actually, we could start opting out and if we opted out it meant that we didn't have to contribute and I think one of our bravest decisions was probably opting out, in retrospect, was opting out of Downton Abbey. But, all that opt-out, it needed to be filled and those hours were filled with good, relevant, Scottish-based contemporary programming.
I: You can deal with this diplomatically - would it be overly cynical to say, here's this new Board, they come in, there are lots of financial difficulties, a lot of this money is going to the Network, if they opt out we know it's going to the court, but they know what they're going to keep and they know that they're going to have to pay a sum of money at the end of this process but the sum of money at the end of the process is likely to be less than the opt-out and, at the end of the day, they've bought themselves breathing space. Is that a cynical interpretation?
R: I think that's a cynical, retrospective interpretation and I think that this was a very fluid situation. One of the things that actually took me by surprise was actually just how hard ITV were pushing and how aggressive they were towards us. And, I have to say, that was a surprise. An unwelcome surprise. So they, I thought that there could be a kind of negotiation with ITV where there could be a mutual respect between our two respective organisations but that never happened. So, I think, what you are leading to was that we ended up in preparation for three simultaneous High Court actions with ITV so the opt-out and how much money we owed ITV was one of those Court cases but what was really at stake with the other Court cases was our sovereign right to exclusive access to ITV Channel Three content in Scotland on all platforms. And that was not clear. So, the Player, for example, had absolutely gone from strength to strength. We would not have been able to support the STV Player unless we didn't have that fight with ITV.
I: Although it was a fight and you've explained why there was a fight, did it curiously work in your favour? Not just because you got the stuff in relation to the Player but, I mean I can't remember the terms of the settlement. The figure of seventeen million sticks in my mind with six million as rights issues but when you looked at what you had given them and what you had to give back, it looks like a good deal from STV's point of view?
R: We were delighted with the outcome. I think it was a, and from that settlement it's enabled us to go on and grow a much more mature relationship with ITV. In one way, they are happy to accept who we are in Scotland and we are equally happy to accept who they are. The relationship has really built in a very mature way since then so, look, if I had my time again, I'd do exactly the same.
I: Let me just ask you if there was (and this is the last question on ITV), were you ever concerned at any point that with, sort of, poking this beast with a big stick that they might just say, "Let's take them over."
R: ITV could have taken us over at any time. Our share prices had plummeted during these moments. It wouldn't have just been the Court Case, I think that, you know, I think that ITV had been free to take it over at any point.
I: Outwith meeting corporate objectives and keeping STV relevant in programming terms, you developed, sort of, off-business initiatives like the Appeal. What was the thinking there?
R: Well, I wanted to show that STV was a force for good and we hadn't been very good at doing that. I think STV had kind of, it hadn't invested in Scotland in the way that I believe it should so, as well as investing in programming, we needed to do more to reach out to communities and to connect with our consumers. So, the Appeal was set up initially as a joint venture between Tom Hunter and STV and the Hunter Foundation and has been a remarkable success. I think the level of awareness of the STV Appeal is virtually ubiquitous now. I think it is round about 90% of Scots know of the STV Appeal and the work that we do. We formed it in 2011. We've raised over £16 million but, beyond that, we've been able to do what we do best, which is to tell stories and to highlight social issues and, I think, probably for me the best example of that was a year ago with a programme called Who Cares?, which had a, it was a look at the structure and deficiencies of the Care system in Scotland. Off the back of that and off the back of the First Minister actually being here for the live Appeal programme that night, she promised a root and branch review of the Care system in Scotland which is now ongoing. So, I think that is just a wonderful example of, really, us at our best but doing exactly what we should be doing.
I: Let's take you back after, well, I suppose during the ITV stuff and after it, what were the KPI's [Key Performance Indicators] that you were setting the business and which ones did you make comfortably and which ones did you not?
R: So, the KPI's have been a great part of this transformation for the Company and it was all about setting the right tone. And my tone was about we'll make it very clear what's important to us, what we need to do and we'll do it very transparently. And a lot of people said when we first came out with the KPI's, "Well, you're never going to hit them!" That's because there was no trust between, or the Management, the previous Management of the Company set and the City and we needed to rebuild that trust and I was determined to use KPI's as a way of doing that. So, we basically have KPI's which cover what I'll call Corporate Objectives, like how much of our profit ability is going to come from non-broadcast activities and then we've got a series of Consumer KPI's so one of them being to outperform the ITV Network in Scotland, others are looking at the performance of our digital businesses and then we have two KPI's which cover our Production business. Basically, we've kind of, we, it's a mixed bag and it always has been and I expect it to be a mixed bag! If we hit every KPI every time then I'd be given a hard time in the City by it saying, "Well, your targets are too soft!!" But what it does is to enable me to talk about what's important to this business to shareholders and to analysts and, indeed, all our staff. And, I think, we've gained a lot of respect for doing that.
I: Just in terms of the relationship of the City, I mean, again, sort of, people on the shop floor probably don't quite appreciate what you do in terms of those relationships, the analyst reports were getting evermore positive by the year as the debt reduced and, although in the early days we were still way off paying a dividend, so just talk to me about how important relationships with the City are in doubling incredibility for the business.
R: Absolutely vital for a PLC. You have to have, you have to have advocates for what you're doing. When I joined, the Company had no advocates, it only had detractors, and, over the time, implementing a very clear, straightforward plan, setting those KPI's we won back that trust and it took a time to do that. I'd argue it probably took, it probably took till 2013 when there was a major readjustment in our share price when the City certainly woke up to the fact that, actually, we were on our way to doubling the margin in the core of our business, we'd taken out about 25% of the core cost of the business, we were consistently growing and we had a digital strategy which put us, kind of, absolutely on the front foot and our audience performance continued to be strong so there were a whole set of really positive metrics and, in 2013 then, there was a major readjustment in our share prices and we kind of got the credit for all the work that we'd been doing since 2007.
I: Was it frustrating for you, 2013, because the City's view and probably ours, were probably slightly undervalued as a Company but what you seem to be indicating there is that it took work, I mean people would have expected for the City to recognise how much the business had turned around. Perhaps they were still looking at the legacy issues?
R: Well, the legacy issues were huge, you know, the size of the pension deficit, the legal actions against ITV, the Pearl and Dean issue, a question mark over for were we going through a systemic decline in the position of the free-to-air public service broadcasting, you know, the list goes on! They were pretty serious issues for any investor so we needed to, basically, whittle those down. We're left now with one legacy issue, which investors can accept, which is a pension deficit but, you know, we go through our triennial valuations and I think the City is comfortable that we can, you know, we have a very affordable funding settlement.
I: Given that you'd indicated that, as an active shareholder, that you were speaking to of a point that you came in, was there any agitation to return money to shareholders before STV did because it did take quite a number of years after you came in for the shareholders to see any return.
R: It did and we should be thankful for the patience that our shareholders had but it's also a kind of sign of our relationship that the Board and myself have built with those shareholders in that they stuck with us through that time. But, I think, the key for me, the key moment when we said, actually, the transformation of the business is behind us and now we're focused on growth, was the return of the dividend in 2013. That was the moment when, you know, we'd been criticised for years as having a broken balance sheet so just the, you know, the totemic sign that that sent was that this Company was back in a position where it could afford to reward its shareholders with a progressive dividend policy, was a very strong statement.
I: I want you to talk to me about what you think your legacy is here in corporate terms and in programming terms. Let's start with the corporate. I suppose it's pretty obvious what it is but what do you see as your legacy in corporate terms?
R: We've got a strong company that's on the front foot and is much loved with a brand that is, kind of, resurgent and connected with Scotland and that is a lot more relevant in 2017 than it was when I joined in 2007. And we have amazing staff. I think a lot of this transformation would not have been possible without the unlocking the potential of our people and, you know, I think that we have a remarkable group of five hundred or so employees and they've actually been, there're the guys that have delivered for the Company. They are at the heart of this organisation and that's why I always place such a high emphasis on, kind of, working with all our people and, as I say, unlocking their potential.
I: And in programming terms? I mean, at the end of the day the relationship with the audience is an on-screen one. In the last ten years we've started to be noticed and talked about.
R: Yeah, I'd say, particularly, I'd say, Scotland Tonight, I think it's been a remarkable success! I mean, we launched just at the right moment and I'm always slightly amused that no matter what the BBC has tried to do to retaliate then, you know, we've come out on top. That just shows you the kind of spirit that sits behind the Company. You know yourself, you've kind of anchored your way through some of the momentous, political occasions over the last few years - the Scottish Independence Referendum being central to that and we came out every time with absolutely flying colours! I think we should, you know, we take a lot of kudos, we've generated a lot of kudos for that. And then I'd also point to a lot of, we're now going on STV2 so we've got a, you know, a group of people who are producing content on a day-in, day-out basis for STV2, incorporating Scotland's first international UK Scottish News bulletin together with, I don't know, programmes like People's History Show, Peter and Roughie. There are a lot more new STV brands and there are some new faces of STV so I'm proud of that.
I: Was there anything that you either got wrong or would have done differently?
R: I mean, that's a good question. I think, look, we've tried lots of things and some of them haven't worked so I thought, soon after I arrived, 'why couldn't we replicate an online jobs site opportunity?' So, we launched STV Jobs to compete with S1. It got nowhere! It completely failed! It flopped. We tried to work with our audience and sell them products and services based on programming so travel, for example. We proved that people were very happy to watch travel shows but they didn't want to book their cruises through us so we've learnt a lot. I'm not sure I'd change the sequencing of any of the big, momentous decisions that we've made. I think our strategy has been proven right. I mean, if anything, I think I'd have liked to try a few more things more quickly but I don't think I would have changed any of the major decisions that we've made.
I: Is it inevitable that a company the size of the STV operating in a digital marketplace, which is horrifically competitive with finite advertising, is simply going to have to accept it will always need to try stuff and speculate stuff and learn to live with a certain amount of failure because if you don't try, you're never going to overcome!
R: Well, you're spot on! That's exactly what we should be doing and we should go on and do and I would like the clock speed of that to speed up if anything. To try more new things. So, for example, we launched the Scottish Children's' Lottery just over a year ago and by the end of this year it will have generated about 1.5 million for young people in Scotland. Next year, if we carry on as we are, then we should generate about £3 million so it's actually going to be generating more for young people than our Appeal. I think there are opportunities in e-commerce where we could look at joining forces with other companies, other organisations and selling services or products. I think that area's really interesting. We've got 2.5 million people now! That's way over half the adult population of Scotland are registered with STV so we have an intimate relationship with those individuals. That's going to be hugely valuable for the Company going forward.
I: As a decade where the legacy issues have been dealt with, all the issues of indebtedness, the programming reputation was not good, it has been revived, there is a sense of focus and identity to the Company that wasn't there and I know that, in a sense, you don't need to answer this because it's not your baby any longer but what do you think the future is for a company the size of STV?
R: There's still a lot of growth. There's still a lot of organic growth so we have followed, after the divestment we always made it very clear to shareholders that our growth, there was enough growth come out of Scotland that we will focus there rather than focussing on acquiring other companies. I am always very, I am always wary about acquisition as a strategy because the track record of just the facts speaking for themselves, most acquisitions do not add value for shareholders and we've been very careful kind of not to go back to the world that we've spent the last ten years kind of digging us out of. However, going forward, there might be opportunities for very focussed acquisitions to come and help support the business but I still see, I still see growth opportunities here in Scotland so that's where I would continue to focus because that is our market.
I: In terms of people at the helm since I've been here in Bill Brown and Gus Macdonald, Andrew Flanagan, Donald Aimsley briefly, yourself more than any of the previous individuals seem to take the issue of internal communications with staff much more seriously than any of the aforementioned and the development of a sort of mission statement and value system for the Company and that just wouldn't have happened under any of the previous people that were here. Why are you so big on this stuff?
R: Because we're a people-based business and you've got to value everybody that works with you and you want a culture where everybody's valued and they understand what they're doing. They understand the bigger picture. They understand how they fit in. I want a culture where people respect their colleagues, respect all the other, the myriad of different skills we've got across the business and you also want a culture where people kind of are innovating, coming up with new ideas, challenging one another, talking about what we do and, I think, we've gone a long way to creating that. You know, we set up what we called the STV Way and I did it through multiple meetings with virtually every one of our staff and you're right, I put a, invested a lot of time and effort into that but it's an absolutely necessary, I want to do that as part of the job. I think that the seven words of Be Bold, Stand Together, Strive to Surprise, where STV was three to four years ago when we put that in place is absolutely, were absolutely the right words. I think, in 2017, they remain absolutely the right words. They tell all our staff, kind of, a little bit about who we must be as an organisation and what it's going to be like to work here as an organisation.
I: Tell me why you've decided to go? Was it that you wanted another professional challenge or do you take the view that you've taken the business as far as you can take it?
R: Well, the easy option is to stay! I love what I do. I love the Company. I'm proud of what we've achieved together. For me, the difficult thing to know is when to move on. The honest answer is that somehow in my mind I clicked over my tenth anniversary and ten years as a public company Chief Executive is a long time. I think it's about four times the average time in a very small club and I just thought it was the right thing to do. I'm young enough to want to go on and do other things. Put my time and energy into new challenges but, no matter what, I will always look back on this, on these ten years with huge fondness and look back on, and I'll continue to be a great Ambassador for the Company going forward.
I: What's your proudest moment?
R: I think my proudest moment has to be the Appeal. I mean, it just has to be because when Tom Hunter and I first got together, the notion of us over seven years generating such an outstanding amount of money, you know, £16 million, for us to start to influence Government policy, for us to start to influence, kind of, making a systemic difference to poverty in the country, which is atrocious and I'm passionate about doing something about it and, I think, you know, I think the Appeal, to me, has given me my proudest, single moment.
I: Anything that's made you laugh, smile, weep?!
R: All, you know, all would be about, I think it would just be right just maybe to close, just to mention Richard Findlay, my former Chairman. He's a remarkable man and he and I led the Company through the first years of the turnaround and he sadly passed away earlier this year. I couldn't have done what I've done without Richard so I would just like to close acknowledging the pivotal role that Richard played at the early stage of the turnaround.
I: Again, since you've mentioned that, again for people who are on the shop floor, people that sit on the Board, what were his key qualities? Because he had a wealth of experience in what was Independent Radio, a Scottish business, I mean he knew the terrain.
R: So, he knew what it took to run a successful media company. He understood audiences and he understood, kind of, where STV should be positioned in the country. To have a Chairman with that wealth of really practical knowledge was immense so he added a huge amount of value and council into the Board.
I: Smashing! I'm happy, Tim, if that's alright, Rob?
R: Are we happy?
I: Very happy. Thanks! [46:12]
[End of Recording]